Much like its fellow recruiters, Hays (HAS) has been hammered by the Covid-19 crisis. Net fee income – also known as gross profit – plunged more than a third in the final quarter to 30 June. While the group says current recruitment activity levels have improved, there are “no signs yet of positive fee momentum”.
Hays had already issued a profit warning back in January on the back of strike action in France, bushfires in Australia and uncertainty created by Brexit and the general election. Now, it is guiding that adjusted operating profit for the full year will come in between £130m-135m, which would be almost half the £249m it produced a year earlier. Chief executive Alistair Cox says the pandemic has produced “conditions far harsher than any I have known”.
While all regions were squeezed, the largest decline was in the UK and Ireland where net fees dropped by 42 per cent. The region accounts for around a fifth of Hays' total net fees. Private sector fees slumped by 46 per cent compared to a somewhat more modest 30 per cent reduction from the public sector. While life sciences recruitment activity increased thanks to additional Covid-19 related work, net fee income from areas such as accountancy, finance and construction fell by over 50 per cent.
Hays' update coincided with the release of the latest jobs data from the Office of National Statistics (ONS). Perhaps surprisingly, the unemployment rate in the UK remained largely flat at 3.9 per cent for the three months to 31 May. While on the one hand people have lost their jobs, many are not actively looking for new work during this crisis. The official unemployment rate only accounts for people who are unemployed and searching for a new job, therefore it understates the true picture. According to payroll data, the number of paid employees dropped by around 650,000 between March and June.
Similarly, the employment rate doesn’t reflect the furloughing of a significant proportion of the national workforce which is still counted as being employed. Total weekly hours worked in the UK between March and May dropped by 17 per cent year-on-year, the largest annual decrease since records began in 1971.
Demand for labour has weakened significantly. Between April and June, job vacancies were down 59 per cent year-on-year, hitting their lowest level since the ONS survey began in 2001. Indicative of the parts of the economy that have been hardest hit by the pandemic, the drop in job openings has been most prominent in the retail and industrial sectors.
It’s likely that the UK jobs landscape will deteriorate further. The government’s furloughing scheme has provided a buffer during this crisis, but when it comes to an end in the autumn, there could be a surge in unemployment. That’s without mentioning the spectre of an upcoming recession.
